WEBVTT - HSBC's $1 Billion Reward, Darkness Falls Across Asia, Big AI Bets Divide Funds

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>This is the Bloomberg Daybake here at podcast Good morning.

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<v Speaker 2>It's Tuesday, the fourth of August. I'm Caroline Hepka in London.

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<v Speaker 1>And I'm Stephen Caroline Brussels. Coming up today, HSBC delivers

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<v Speaker 1>results that reward investors faith in Europe's largest bank as

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<v Speaker 1>it ramps up cost cutting plans.

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<v Speaker 2>Satellite images show energy starved countries in Asia going dark

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<v Speaker 2>as tensions over the strait of Homer's Dragon.

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<v Speaker 1>Plus why big ai bets are dividing the business of

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<v Speaker 1>venture capital, leaving smaller funds behind.

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<v Speaker 2>Let's start with the roundup of our top stories.

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<v Speaker 1>HSBC has announced a new one billion dollars share by

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<v Speaker 1>back after reporting second quarter earnings that beat estimates. Pre

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<v Speaker 1>tax profit came in at ten point one billion dollars,

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<v Speaker 1>ahead of the nine point five billion that analysts had expected.

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<v Speaker 1>The bank also raised its cost saving target to two

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<v Speaker 1>billion dollars by the end of this year, as CEO

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<v Speaker 1>jojel Hedri accelerates his overhaul of Europe's largest bank through

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<v Speaker 1>asset sales and simplifying its operations.

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<v Speaker 3>Is what he told Bloomberg this morning.

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<v Speaker 4>We are becoming the stronger bank that we set out

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<v Speaker 4>to build. We're very pleased with what we announced this morning.

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<v Speaker 4>We're growing across all our indicators, or revenue growing, or

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<v Speaker 4>law lawns and deposits are growing, or income is growing.

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<v Speaker 4>We generated returns of nineteen and a half percent on

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<v Speaker 4>tangible equity, so this is you know, this is a

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<v Speaker 4>good demonstration of a.

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<v Speaker 5>Strong business momentum.

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<v Speaker 4>We're also very pleased with the progress we're making on

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<v Speaker 4>the strategy, which we're executing with precision, with discipline and

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<v Speaker 4>at base.

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<v Speaker 3>CEO Jel Hedri speaking there as.

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<v Speaker 1>HSBC shares have touched record highs in recent weeks, recovering

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<v Speaker 1>from a June slump sparked by China's crackdown on cross

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<v Speaker 1>border capital flows.

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<v Speaker 2>Now, the water levels in one of Europe's most important

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<v Speaker 2>rivers are at their lowest point at one hunter in

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<v Speaker 2>fifty years. The Rhine River's navigable depth fell to just

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<v Speaker 2>twenty four centimeters at one key choke point yesterday. Bloomberg's

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<v Speaker 2>energy reporter Avera Brendel says that's the lowest records began

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<v Speaker 2>in eighteen eighty.

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<v Speaker 6>Some memories might come up from the twenty eighteen drought

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<v Speaker 6>and things are looking similarly difficult. But also what is

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<v Speaker 6>important to mention is that like for example, the Rhine

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<v Speaker 6>water level already is almost at the twenty eighteen level,

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<v Speaker 6>but we are just at the beginning of summer. So

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<v Speaker 6>the twenty and eighteen level. Last time that was solo

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<v Speaker 6>happened at the end of summer, and now the summer's

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<v Speaker 6>just getting started.

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<v Speaker 2>Brundell As The extreme weather is also drying up other

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<v Speaker 2>crucial European waterways, including the Danube. As well as disrupting trade,

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<v Speaker 2>the drought is disrupting power generation and creating the conditions

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<v Speaker 2>for massive wildfires.

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<v Speaker 1>US President Donald Trump says Iran has a last chance

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<v Speaker 1>to reach a deal with the United States. Tehran insists

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<v Speaker 1>it's not negotiating directly with Washington, saying it's discussing shipping

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<v Speaker 1>routes through the Strait of Hormoes with Oman instead. Despite

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<v Speaker 1>President Trump's demands, Iran has given no indication it will

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<v Speaker 1>reopen the Strait of Hormus and allow toll free transit.

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<v Speaker 1>Trump says military action is still on the table.

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<v Speaker 6>I want to give them every last shit before decapitation.

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<v Speaker 3>Very tough to do what we have planned.

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<v Speaker 5>Still planned.

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<v Speaker 3>We'll see what happens.

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<v Speaker 1>It's not clear which negotiations President Trump was referring to

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<v Speaker 1>or who is involved. He's repeatedly backed away from threats

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<v Speaker 1>of military escalation in favor of diplomacy, only to see

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<v Speaker 1>those talks collapse.

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<v Speaker 2>Well, all prices are rebounding modestly after yesterday's sharp sell

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<v Speaker 2>lot of US investors way persident Trump's latest ultimatum to

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<v Speaker 2>move on. More than eighty percent of the oil passing

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<v Speaker 2>through the Strait of Hormuz is bound for Asia, where

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<v Speaker 2>the economic impact is becoming increasingly visible. His Bloomberg's James Wilcock.

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<v Speaker 7>A war thousands of miles away is leaving a mark

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<v Speaker 7>on Asia that can be seen from space. Blueberg Economics's

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<v Speaker 7>analysis of NASA satellite imagery found nearly sixty percent of

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<v Speaker 7>the region experience of normal declines in nighttime light after

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<v Speaker 7>the Iran conflict began. The Junes Ces fire brought that

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<v Speaker 7>figure down to fifty four percent, but renewed disruption in

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<v Speaker 7>the Strait up MOOS could quickly reverse that trend, especially

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<v Speaker 7>in fuel dependent economies like Bangladesh, Pakistan, and Cambodia. That

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<v Speaker 7>DILAN was concentrated outside major cities, suggesting high energy costs

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<v Speaker 7>a hitting poorer rural communities the hardest. In London, James

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<v Speaker 7>Orcock Bloomberg Radio.

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<v Speaker 1>The European Union will try to restore unity today at

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<v Speaker 1>a meeting of Home Affairs ministers after Spain's migrant crisis

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<v Speaker 1>exposed to deep divisions within the block. In a letter,

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<v Speaker 1>a YOU commissioned president Versus Vanderline called for a collective

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<v Speaker 1>response after roughly fifty thousand undocumented migrants swam into the

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<v Speaker 1>Spanish enclave Theatare Madrid, says the vast majority of those

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<v Speaker 1>who crossed illegally have now been returned. Boomberg's europe Executive

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<v Speaker 1>outor Chad Thomas, as the issue sparked remarkably public attacks

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<v Speaker 1>on Spain's Prime minister.

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<v Speaker 8>There are many U countries that are on the cusp

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<v Speaker 8>of holding elections and this is a hot button topic,

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<v Speaker 8>and so no leader wants to be seen as the

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<v Speaker 8>one who's not cracking down on any concerns that people

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<v Speaker 8>might have over illegal migration. But most of these people

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<v Speaker 8>have already returned to Morocco, and of course they never

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<v Speaker 8>were actually on the Spanish mainland, they were in this enclave.

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<v Speaker 1>Chad almos was speaking, has several European countries that threaten

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<v Speaker 1>to impose border checks and even to suspend Spain's participation

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<v Speaker 1>in the EU's Free Travel Zone. Today's meeting, Spain is

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<v Speaker 1>expected to demand solidarity from other member states.

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<v Speaker 2>US Treasury Secretary Scott Besson has called on the Federal

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<v Speaker 2>Reserve to expand a facility that Japan can use to

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<v Speaker 2>support the Yes and the Fair Repo. Facility let's foreign

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<v Speaker 2>governments borrow dollars against their holdings of US treasuries. In

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<v Speaker 2>a social media post, Bestin said the Treasury would encourage

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<v Speaker 2>this facility to be upsized. Shasuki Yamada Japan effects and

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<v Speaker 2>rate strategies that Bank of America says the move could help.

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<v Speaker 9>One of the biggest you know, the side effects of

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<v Speaker 9>intervention is that Japan might have to sell a large

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<v Speaker 9>amount of US treasuries and that could destabilize the bond

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<v Speaker 9>market in the US, which could also spill over to

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<v Speaker 9>Japan as well. So I think, you know, this facility

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<v Speaker 9>definitely helps, and yeah, I think Japan can probably.

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<v Speaker 3>Do more than otherwise.

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<v Speaker 2>Bank for America's Shisuki Yamada speaking earlier, economists say that

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<v Speaker 2>Washington's priority is preventing high Japanese bond deals from spilling

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<v Speaker 2>into the thirty one trillion dollar US treasury market. The

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<v Speaker 2>coordinated move also offers a way to keep Tokyo investing

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<v Speaker 2>in America while encouraging the Bank of Japan to keep

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<v Speaker 2>raising interest rates.

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<v Speaker 1>Apple is taking on the UK government. Bloomberg understands the

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<v Speaker 1>iPhone maker is once again challenging attempts to access the

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<v Speaker 1>data of its customers. Are reported too Out of Bio

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<v Speaker 1>has the story.

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<v Speaker 10>Apple has filed a fresh protest against the government's pursuit

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<v Speaker 10>of user data stored in the cloud, according to sources

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<v Speaker 10>close to the matter. It's the latest development in a

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<v Speaker 10>major privacy fight, which kicked off last year when UK

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<v Speaker 10>authorities ordered the tech giant to bypass encryption used to

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<v Speaker 10>secure customer information. Under pressure from US President Donald Trump,

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<v Speaker 10>the government agreed not to seek Americans data, but has

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<v Speaker 10>continued to push for access to UK user communications. A

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<v Speaker 10>UK government spokesperson declined to comment on the specifics of

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<v Speaker 10>the case, but said that the country supports robust privacy protections,

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<v Speaker 10>Whilst Apple confirmed it had filed the legal challenge in

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<v Speaker 10>an email statement, but declined to comment. Further hearing on

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<v Speaker 10>the challenge is scheduled full September in London.

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<v Speaker 2>Do you added Biot Bloomberg Radio. Those are our top

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<v Speaker 2>stories for you. Now let's look at the markets. There

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<v Speaker 2>is tech stock divergence between the US and Asia. Mascish

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<v Speaker 2>Pacific indexes down half of one percent. Very volatile session

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<v Speaker 2>again for the cos B, which currently is down one percent,

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<v Speaker 2>but big intra day swings. The S and P five

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<v Speaker 2>hundred closed near record high. Yesterday the DAS hit a

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<v Speaker 2>fresh record high the stock six hundred dollars to close

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<v Speaker 2>up by four tenths of one percent, So again just

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<v Speaker 2>shy of July's record half to a very positive European

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<v Speaker 2>earning season, HSBC's CEO George Hedri saying he's please with

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<v Speaker 2>progress that the business is making, so that after their

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<v Speaker 2>earnings just this morning, the Japanese yen, after four days

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<v Speaker 2>of gains, is slipping. Despite the intervention that we saw

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<v Speaker 2>that did lead to gains, the Japanese yen is down

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<v Speaker 2>two tenths and brain CREWD futures trade up one and

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<v Speaker 2>a half percent eighty five dollars. Those in the markets.

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<v Speaker 1>In a moment, we'll bring you more on those results

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<v Speaker 1>from HSPC plus YAI is creating a divide in the

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<v Speaker 1>venture capital world. Put another story that we've been reading

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<v Speaker 1>this morning, cows are back in fashion, at least when

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<v Speaker 1>it comes to your breakfast table. Jillian Deutsch has been

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<v Speaker 1>writing about shifting consumer trends around plant based milks. After

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<v Speaker 1>surging sales and the twenty ten seamstoppers are now turning

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<v Speaker 1>away from their almond oat and other alternatives to dairy.

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<v Speaker 1>Sales of these dairy free milks have fallen by more

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<v Speaker 1>than five percent each year for the past three years,

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<v Speaker 1>according to data from Circano. What Cow's milk sales have

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<v Speaker 1>remained steady. So what's behind all of this, Well, it's

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<v Speaker 1>partly people are paying more attention to what's actually in

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<v Speaker 1>these non dairy milk, particularly looking at the additives that

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<v Speaker 1>are in quite a lot of them. Kaw's book also

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<v Speaker 1>appears a little bit simpler in that equation if you're

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<v Speaker 1>looking at those things. It also has more protein, which

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<v Speaker 1>is a very hot nutritional trend. But as also the

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<v Speaker 1>price cos milk's cheaper, particularly in the US, and it

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<v Speaker 1>means that you know, people are perhaps less able or

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<v Speaker 1>less willing to pay the premium for non dairy milks.

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<v Speaker 3>Yeah, I love it.

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<v Speaker 2>This was the classic politicians question, wasn't it. Do you

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<v Speaker 2>know how much a pint of milk or a lead

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<v Speaker 2>of milk costs you? I mean my fridge has a

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<v Speaker 2>number of different milks in it. But yes, I do

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<v Speaker 2>notice that the non dairy versions are about twice as

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<v Speaker 2>expensive as the as the regular milk. But because we

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<v Speaker 2>sit in set offices, Stephen, I know you're a coffee drinker.

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<v Speaker 2>I actually don't know what sort of milk you put

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<v Speaker 2>in your coffee.

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<v Speaker 3>I'm very I just haven't moved away from Go's milk.

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<v Speaker 1>I never got on this trend because everything's cyclical. I'm

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<v Speaker 1>actually back on trend again by simply doing nothing. The

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<v Speaker 1>best way to remain you know, it's I can stop

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<v Speaker 1>to watch is Right twice a day. So that's my

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<v Speaker 1>philosophy for a life. A very interesting and Jillian has

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<v Speaker 1>a great conversation with the CEO of Oakley as well,

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<v Speaker 1>the leading Swedish brand in old milk, and what they're

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<v Speaker 1>doing to try and boost their sales as well after

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<v Speaker 1>seeing decline. So an interesting dell into the world of

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<v Speaker 1>milk from Jillian Deutsche put links that story in our

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<v Speaker 1>podcast show notes.

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<v Speaker 2>Okay, well, let's dig into the results from HSBC, now,

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<v Speaker 2>shall we? With Europe's biggest bang reporting higher profits and

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<v Speaker 2>expected and announcing that it would resume as share buybacks

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<v Speaker 2>the lend of CEO Georgelle Hedries, we're speaking to Bloomberg's

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<v Speaker 2>Frosci Laqua. Here's some of their discussion.

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<v Speaker 4>The results as a whole are demonstrating that we are

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<v Speaker 4>becoming the stronger bank that we set.

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<v Speaker 5>Out to build.

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<v Speaker 4>We're very pleased with what we announced this morning. We're

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<v Speaker 4>growing across all our indicators. Our revenue growing or law

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<v Speaker 4>e loans and deposits are growing, our income is growing.

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<v Speaker 4>We generated returns of nineteen and a half percent on

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<v Speaker 4>tangible equity, so this is, you know, this is a

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<v Speaker 4>good demonstration of a strong business momentum. We're also very

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<v Speaker 4>pleased with the progress we're making on the strategy, which

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<v Speaker 4>we're executing with precision, with discipline and at pace. And

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<v Speaker 4>we've upgraded some of our strategic deliverables, including simplification related saves,

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<v Speaker 4>and just announced three more non strategic exits over the

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<v Speaker 4>last ten days. That's fifteen exits since twenty twenty five,

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<v Speaker 4>and all of this is giving us capacity to invest,

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<v Speaker 4>capacity to accelerate our investment.

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<v Speaker 5>And finally, let me say we're we're you know, we're.

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<v Speaker 4>Very confident in the potential of this bank. We're very

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<v Speaker 4>confident our ability to unlock it. We are now a

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<v Speaker 4>leader and a number of areas where we're operating with,

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<v Speaker 4>you know, the Asian leader in wealth management the world

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<v Speaker 4>to straight bank, and we have structured growth opportunities along

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<v Speaker 4>our footprint, I mean Asian wealth, Asia, by Asia, the

0:12:36.920 --> 0:12:41.120
<v Speaker 4>UK growth opportunities. So we're pleased to put more of

0:12:41.160 --> 0:12:42.800
<v Speaker 4>our strength and the service for out lines.

0:12:42.920 --> 0:12:45.160
<v Speaker 11>I mean, it's impressive because when you privatize Hanks and

0:12:45.240 --> 0:12:47.120
<v Speaker 11>last year you said, look in terms of buybacks will

0:12:47.120 --> 0:12:49.560
<v Speaker 11>probably take a couple of quarters. So what does this

0:12:49.840 --> 0:12:52.520
<v Speaker 11>big buy bank actually tell us about the return generation

0:12:53.120 --> 0:12:56.960
<v Speaker 11>capability of the bank post Hanks And yeah.

0:12:56.720 --> 0:12:59.560
<v Speaker 4>So we're pleased to have resumed buy back this quare

0:12:59.600 --> 0:13:01.720
<v Speaker 4>to three quarters after we announced hanksanging.

0:13:02.120 --> 0:13:04.400
<v Speaker 5>We said at that time that our.

0:13:04.280 --> 0:13:07.920
<v Speaker 4>Priority would be to rebuild capital post privatization. We estimated

0:13:07.960 --> 0:13:10.520
<v Speaker 4>three quarters to be about the time to build that

0:13:10.840 --> 0:13:15.680
<v Speaker 4>three quarters on were able to return excess capital to shareholders. Remember,

0:13:16.160 --> 0:13:19.720
<v Speaker 4>our priority use of capital. First is the dividend payoutratio.

0:13:20.160 --> 0:13:24.080
<v Speaker 4>Second is supporting the organic growth of the business. Organic

0:13:24.080 --> 0:13:26.960
<v Speaker 4>growth with an outer's captite at the right returns within

0:13:27.000 --> 0:13:28.199
<v Speaker 4>our strategic priorities.

0:13:28.440 --> 0:13:30.320
<v Speaker 5>And we're very pleased our loan books have grown.

0:13:30.320 --> 0:13:35.920
<v Speaker 4>I mean, UK has seen consistent growth and we've been

0:13:35.960 --> 0:13:38.079
<v Speaker 4>able to lean in. We're very pleased to see Hong

0:13:38.160 --> 0:13:41.640
<v Speaker 4>Kong finally resume to loan growth.

0:13:42.000 --> 0:13:43.240
<v Speaker 5>So those will be the priority.

0:13:43.320 --> 0:13:47.720
<v Speaker 4>Of course, excess capital priority distribution mechanism has shared buybacks,

0:13:48.080 --> 0:13:49.000
<v Speaker 4>hence the one billion.

0:13:49.400 --> 0:13:52.400
<v Speaker 11>Your head of corporate Investment Bank said you could actually

0:13:52.400 --> 0:13:58.679
<v Speaker 11>become a three hundred billion capitalation bank shortly. I mean

0:13:58.720 --> 0:14:01.240
<v Speaker 11>you're I think by twenty thirty is what he said.

0:14:01.240 --> 0:14:03.440
<v Speaker 11>You're thirty billion away from that. Do you think you

0:14:03.480 --> 0:14:06.240
<v Speaker 11>can become three hundred billion in terms of size and

0:14:06.320 --> 0:14:07.600
<v Speaker 11>like six to twelve months.

0:14:08.080 --> 0:14:10.240
<v Speaker 4>Well, look, I mean we're certainly very pleased with the

0:14:10.240 --> 0:14:14.840
<v Speaker 4>share price reaction to the delivery of our strategy. Where

0:14:14.960 --> 0:14:17.679
<v Speaker 4>this will go as a metaphor shareholders to judge. What

0:14:17.720 --> 0:14:20.680
<v Speaker 4>I'm really focused on is delivering for the business, focused

0:14:20.680 --> 0:14:23.680
<v Speaker 4>on all the growth opportunities that we're driving for the business,

0:14:24.920 --> 0:14:29.360
<v Speaker 4>Delivering the strategy and the simplification at pace, and you know,

0:14:29.400 --> 0:14:32.000
<v Speaker 4>the upgrades we have shown in our capability to do

0:14:32.160 --> 0:14:34.200
<v Speaker 4>so and the speed at which we are able to

0:14:34.240 --> 0:14:39.120
<v Speaker 4>do it safely are our good testament of the capacity

0:14:39.200 --> 0:14:41.320
<v Speaker 4>we're creating to invest even further.

0:14:41.080 --> 0:14:42.400
<v Speaker 5>In the business.

0:14:42.400 --> 0:14:44.960
<v Speaker 11>You've also said that Hong Kong will overtakes Switzerland as

0:14:45.120 --> 0:14:47.320
<v Speaker 11>the world's largest cross border was center by the end

0:14:47.360 --> 0:14:48.120
<v Speaker 11>of the decade.

0:14:48.320 --> 0:14:49.680
<v Speaker 3>Actually it's done so already.

0:14:49.720 --> 0:14:52.840
<v Speaker 11>What does that mean for wealth creation in Asia and

0:14:53.040 --> 0:14:54.080
<v Speaker 11>your story in it?

0:14:54.880 --> 0:14:56.080
<v Speaker 5>Well, yeah, I'm.

0:14:56.040 --> 0:14:58.880
<v Speaker 4>Very pleased to see, you know, Hong Kong again becoming

0:14:58.960 --> 0:15:02.520
<v Speaker 4>this world leader for cross border web management. I mean,

0:15:02.600 --> 0:15:04.480
<v Speaker 4>Hong Kong is a home market for us. We are

0:15:04.560 --> 0:15:08.560
<v Speaker 4>the leader in web management across Asia. We've grown our

0:15:08.600 --> 0:15:11.040
<v Speaker 4>web parances in Hong Kong by ten percent. We're at

0:15:11.080 --> 0:15:14.840
<v Speaker 4>half a trillion dollars. We continue adding clients in Hong Kong,

0:15:14.880 --> 0:15:18.000
<v Speaker 4>six hundred and forty thousand new clients across our two brands,

0:15:18.040 --> 0:15:20.240
<v Speaker 4>the two iconic brands we hold in Hong Kong, HSBC

0:15:20.360 --> 0:15:24.840
<v Speaker 4>and Angsing Bank. So we're very pleased with the momentum

0:15:24.880 --> 0:15:27.760
<v Speaker 4>that Hong Kong and the sophistication that the Hong Kong

0:15:27.800 --> 0:15:30.880
<v Speaker 4>as a platform is creating to be the you know,

0:15:30.960 --> 0:15:34.200
<v Speaker 4>the cross border leader in the world. Remember also, Hong

0:15:34.280 --> 0:15:36.120
<v Speaker 4>Kong is a technology hub. We're seeing a lot of

0:15:36.200 --> 0:15:39.720
<v Speaker 4>investment in Hong Kong in Ai. We will be launching

0:15:39.880 --> 0:15:43.600
<v Speaker 4>very soon the next couple of months stable coin in

0:15:43.640 --> 0:15:46.240
<v Speaker 4>Hong Kong, you know, as you know, as the you know,

0:15:46.280 --> 0:15:50.320
<v Speaker 4>they're leading center for bank issued stable coins within a

0:15:50.440 --> 0:15:55.960
<v Speaker 4>very good regulatory framework. So all good developments. Given our

0:15:56.160 --> 0:15:56.920
<v Speaker 4>presence in Hong.

0:15:56.880 --> 0:15:59.600
<v Speaker 11>Kong for Hanksang, how many more synergies are you expecting

0:15:59.600 --> 0:16:00.280
<v Speaker 11>to come from that?

0:16:00.760 --> 0:16:03.960
<v Speaker 4>Yeah, I mean Hank Sanng synergies. You know, we were

0:16:04.000 --> 0:16:06.840
<v Speaker 4>executing in more than eighty percent of all the synergy workstream.

0:16:06.920 --> 0:16:09.080
<v Speaker 5>So this is going on as per plan.

0:16:09.520 --> 0:16:14.160
<v Speaker 4>We've already announced leadership across most of the infrastructure areas,

0:16:14.160 --> 0:16:18.640
<v Speaker 4>the back office areas, the technology areas, the manufacturing areas.

0:16:19.000 --> 0:16:22.120
<v Speaker 4>This will allow us to create the alignment and the

0:16:22.160 --> 0:16:24.600
<v Speaker 4>synergies that you will achieve. I'll give you one example,

0:16:24.720 --> 0:16:27.680
<v Speaker 4>very telling example in Q two, Hank saying, as of

0:16:27.760 --> 0:16:32.080
<v Speaker 4>May started to use some of the digital onboarding capabilities,

0:16:32.440 --> 0:16:36.800
<v Speaker 4>customer acquisition capabilities that HSBC built. They were able in

0:16:36.920 --> 0:16:39.600
<v Speaker 4>Q two to double the number of clients they onboarded,

0:16:39.640 --> 0:16:42.120
<v Speaker 4>sixty thousand clients on boarding Q two compared to thirty

0:16:42.200 --> 0:16:46.120
<v Speaker 4>thousand Q one. Immediate visible benefit of those synergies.

0:16:46.480 --> 0:16:50.920
<v Speaker 2>So that was the HSBCCO Jeorgel Hedri speaking to Bloombergs

0:16:50.920 --> 0:16:55.040
<v Speaker 2>farc In Laqua after the London headquartered lender reported second

0:16:55.160 --> 0:16:59.840
<v Speaker 2>quarter results. Stay with us more from Bloomberg Day BAQUB

0:17:00.040 --> 0:17:04.960
<v Speaker 2>coming up after this. Well, the rush to AI has

0:17:05.040 --> 0:17:09.320
<v Speaker 2>warped the venture capital market, with money flowing disproportionately to

0:17:09.359 --> 0:17:12.040
<v Speaker 2>a handful of top two investors that back to the

0:17:12.119 --> 0:17:16.639
<v Speaker 2>technology early, and that has left smaller VC funds struggling

0:17:16.680 --> 0:17:20.000
<v Speaker 2>to fundraise. Bella Farr, who leads our team covering find

0:17:20.080 --> 0:17:22.760
<v Speaker 2>Us in the UK, joins us now for more on

0:17:22.840 --> 0:17:24.920
<v Speaker 2>this story, Bell are good to speak to you. Tell

0:17:25.000 --> 0:17:27.760
<v Speaker 2>us more than about the effect that AI is having

0:17:27.800 --> 0:17:31.000
<v Speaker 2>on venture capital. Who are the winners and losers?

0:17:31.440 --> 0:17:33.359
<v Speaker 12>Yeah, So at the end of the day, it's ones

0:17:33.400 --> 0:17:36.399
<v Speaker 12>that can show returns, right, and in the past few years,

0:17:36.800 --> 0:17:40.760
<v Speaker 12>AI has really come to dominate, to dominate all exits.

0:17:41.480 --> 0:17:42.520
<v Speaker 3>You know, five of.

0:17:42.440 --> 0:17:46.640
<v Speaker 12>The biggest exits that we've seen in the last few

0:17:46.720 --> 0:17:49.600
<v Speaker 12>years have been from AI companies. So if you're a

0:17:49.640 --> 0:17:54.520
<v Speaker 12>smaller fund that didn't invest in open AI and Therapic,

0:17:54.800 --> 0:17:57.800
<v Speaker 12>you know, SpaceX investors are really asking, well, can you

0:17:57.920 --> 0:18:01.960
<v Speaker 12>prove returns? And you know, before we agree to invest further,

0:18:02.080 --> 0:18:04.879
<v Speaker 12>we would like to see some exits. We would like

0:18:04.920 --> 0:18:06.959
<v Speaker 12>to see some proof that you can actually give us

0:18:06.960 --> 0:18:09.680
<v Speaker 12>our money back, you know, not just one times over,

0:18:09.760 --> 0:18:12.840
<v Speaker 12>but two, three, four times over. So, you know, smaller

0:18:12.880 --> 0:18:15.679
<v Speaker 12>funds are just having a harder time kind of convincing

0:18:16.119 --> 0:18:19.080
<v Speaker 12>investors to buy on when they haven't been able to

0:18:19.119 --> 0:18:21.679
<v Speaker 12>show you know, the same sort of returns that some

0:18:21.720 --> 0:18:24.359
<v Speaker 12>of the biggest funds that do have access to AI

0:18:24.560 --> 0:18:27.680
<v Speaker 12>that got you know, massive returns on SpaceX for example.

0:18:28.680 --> 0:18:31.560
<v Speaker 12>You know, if they can't prove that sort that those

0:18:31.600 --> 0:18:34.760
<v Speaker 12>same sort of investments, they're having a harder time raising money.

0:18:35.720 --> 0:18:38.800
<v Speaker 1>Is this the same geographical story that we're seeing with

0:18:38.920 --> 0:18:42.000
<v Speaker 1>investments in AI, where because the big players are in

0:18:42.040 --> 0:18:44.760
<v Speaker 1>the US, that is where the money is flowing to

0:18:45.200 --> 0:18:47.960
<v Speaker 1>in the majority of cases, are European funds losing out

0:18:48.000 --> 0:18:48.639
<v Speaker 1>in particular?

0:18:48.680 --> 0:18:53.160
<v Speaker 12>I wonder, yeah, I think that there's definitely a geographical advantage, right,

0:18:53.720 --> 0:18:57.159
<v Speaker 12>but also not only are they just physically closer and

0:18:57.200 --> 0:18:59.840
<v Speaker 12>able to connect with founders and other investors that are

0:18:59.840 --> 0:19:03.600
<v Speaker 12>in AI companies, but they're also able to write bigger checks. Right,

0:19:03.680 --> 0:19:08.040
<v Speaker 12>There's there's just a lot more funding capacity available in

0:19:08.080 --> 0:19:14.680
<v Speaker 12>the US for these AI companies that need so much capital. Right,

0:19:14.720 --> 0:19:17.480
<v Speaker 12>You're not talking about one hundred million dollar check here,

0:19:17.480 --> 0:19:20.080
<v Speaker 12>You're talking you know, in the billions, and you really

0:19:20.080 --> 0:19:22.639
<v Speaker 12>need to be able to have the scale and reach

0:19:22.760 --> 0:19:26.000
<v Speaker 12>and the investors that will back that up.

0:19:26.320 --> 0:19:29.120
<v Speaker 2>Yeah, So what does all of that mean then for

0:19:29.720 --> 0:19:33.320
<v Speaker 2>the startups then and the startups that they're they're funding.

0:19:34.000 --> 0:19:36.800
<v Speaker 12>So if it's taking longer for some of these funds

0:19:36.800 --> 0:19:39.159
<v Speaker 12>to raise money, it's probably going to take longer for

0:19:39.240 --> 0:19:41.920
<v Speaker 12>the startups to actually get them. That's you know, first

0:19:41.960 --> 0:19:44.640
<v Speaker 12>of all, that if a startup needs that a startup

0:19:44.720 --> 0:19:48.040
<v Speaker 12>and that's not in the AI space needs funding, they

0:19:48.119 --> 0:19:49.879
<v Speaker 12>might just have to be a little more impatient. So

0:19:49.920 --> 0:19:53.040
<v Speaker 12>we have reporting that you know, there were firms that

0:19:53.040 --> 0:19:56.320
<v Speaker 12>were raising that were kind of weighing fundraiseres last year

0:19:56.480 --> 0:20:00.439
<v Speaker 12>that those processes have just kind of slowed down or

0:20:00.640 --> 0:20:04.560
<v Speaker 12>the firms are reconsidering, but also investors are really demanding AI.

0:20:04.680 --> 0:20:05.840
<v Speaker 3>So what happens if you're in.

0:20:06.080 --> 0:20:08.639
<v Speaker 12>You know, if you're a food delivery startup that was

0:20:08.680 --> 0:20:11.359
<v Speaker 12>really big in the pandemic, or a financial technology firm

0:20:11.400 --> 0:20:13.800
<v Speaker 12>that you know, raised a whole bunch of money in

0:20:13.840 --> 0:20:16.720
<v Speaker 12>twenty twenty one. I think for those companies, you really

0:20:16.800 --> 0:20:19.639
<v Speaker 12>need to show that you can have scale and you know,

0:20:19.760 --> 0:20:22.120
<v Speaker 12>investors might be more willing to.

0:20:22.040 --> 0:20:22.639
<v Speaker 3>Buy into that.

0:20:23.359 --> 0:20:25.399
<v Speaker 12>Otherwise it's just going to take you a lot longer

0:20:25.440 --> 0:20:28.480
<v Speaker 12>to raise money.

0:20:29.280 --> 0:20:31.640
<v Speaker 3>Thanks for listening to Bloomberg Daybreak Europe.

0:20:31.840 --> 0:20:34.400
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0:20:34.400 --> 0:20:36.680
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0:20:42.720 --> 0:20:45.280
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